Slide 1: Results Presentation for the year ended 31 December 2010
R E S U LT S P R E S E N TAT I O N for the year ended 31 December 2010 Stuart Elliot (CEO) and Zanele Matlala (CFO)
Slide 2: Legal Notice / Disclaimer
Legal Notice / Disclaimer This presentation is published solely for informational purposes and does not constitute investment, legal, tax or other advice nor is it to be relied upon in making an investment decision. Information contained herein has been taken from sources considered by Merafe Resour
Slide 3: Agenda
Agenda 1. Highlights and safety 2. Market review 3. Financial review 4. Projects 5. Outlook 6. Appendix 3
Slide 4: Highlights and safety
1. Highlights and safety 2. Market review 3. Financial review 4. Projects 5. Outlook 6. Appendix Royal Bafokeng Stadium – Rustenburg, SA 4
Slide 5: Highlights
Highlights Significant increase in EPS to 11 cents per share Increased production volumes by 48% to 300ktpa Breakthrough achievements in optimising reductant mix Stable dividend policy continues at 2 cents per share A best performer on the JSE SRI Index for fourth consecutive year 5
Slide 6: Continued commitment to improving safety
Continued commitment to improving safety • Total recordable lost time injury frequency rate reduced by 31% y-o-y • One fatality during the year • Mr Kgokong Simon Malapane was fatally injured at the Lion ferrochrome plant • Steps taken to improve safety • SLAM – Stop, Look, Assess & Manage • SEEP –
Slide 7: Market review
1. Highlights and safety 2. Market review 3. Financial review 4. Projects 5. Outlook 6. Appendix Soccer City, Soweto, SA 7
Slide 8: Increase in stainless steel production in all major regions
Increase in stainless steel production in all major regions 35000 20% 2009 30000 2010 25000 ‘000 tonnes 20000 17% 15000 26% 10000 14% 30% 5000 37% (0,7%) 0 1 210 1 201 1 618 2 222 2 607 3 389 4 811 5 501 5 974 7 526 9 751 11 383 25 971 31 222 Others NAFTA Japan S.Korea / European China Total Taiwan
Slide 9: Overview of the ferrochrome market in 2010
Overview of the ferrochrome market in 2010 • Q2- FeCr price settled at 136USc/lb • China demand returns together with North America and Europe • SA electricity price increased by 25% effective 1 April 2010 • Q3- FeCr price settled at 130USc/lb • Seasonal shutdown in SS production • Euro crisis & Ni
Slide 10: Global ferrochrome supply largely driven by South Africa and China
Global ferrochrome supply largely driven by South Africa and China 9000 President Zuma, “ One of government’s 44% 2009 priorities this year is also to finalise and 8000 2010 adopt the beneficiation strategy as the 7000 official policy of government, so that we can start reaping the full benefits of
Slide 11: Global ferrochrome demand largely driven by EU and China
Global ferrochrome demand largely driven by EU and China 10000 2009 21% 9000 2010 8000 7000 6000 ‘000 tonnes 5000 4% 4000 3000 38% 2000 29% 58% 11% 1000 116% 0 229 494 459 727 620 691 939 1 209 1 234 1 700 3 660 3 793 7 141 8 614 NAFTA Japan Others S. Korea / European China Total Taiwan / India Unio
Slide 12: Financial review
1. Highlights and safety 2. Market review 3. Financial review 4. Projects 5. Outlook 6. Appendix Moses Mabhida Stadium- Durban, SA 12
Slide 13: Outstanding turnaround from 2009 global economic crisis
Outstanding turnaround from 2009 global economic crisis • Revenue up 39% y-o-y to R2.6bn • Profit for the year of R279m (EPS and HEPS of 11cents) compared to loss of R152m in 2009 • Ferrochrome inventory remains at low levels for the industry • Healthy cash balance of R321 million • Enabled dividend
Slide 14: Revenue increased due to higher ferrochrome prices, partially offset by the strength of the rand
Revenue increased due to higher ferrochrome prices, partially offset by the strength of the rand 2010 2009 % Change Revenue (R ’million) 2 558 1 839 39% Saleable production tonnes 291 000 281 000 4% Average exchange rate 7.32 8.42 (13%) (Rand:USD) Average benchmark 124 85 46% ferrochrome price in US
Slide 15: Production costs contained
Production costs contained • Production costs increased in Rand terms by 10% • Chrome ore costs increased • Increase of 25% in electricity prices • Lower reductant costs 15
Slide 16: Reconciliation of EBITDA to profit
Reconciliation of EBITDA to profit 600 564 500 -34 400 -114 R’ Millions -25 300 -20 279 -88 -4 200 100 0 Merafe's Corporate Depreciation Net financing Current tax Deferred tax Secondary Profit 20.5% of costs costs expense expense tax on EBITDA from companies the Venture 16
Slide 17: Balance sheet remains strong
Balance sheet remains strong As at As at 31 December 31 December 2010 2009 Audited R’000 Audited R’000 Total non-current assets 2,192,600 1,949,464 Property, plant and equipment 2,192,600 1,949,464 Total current assets 1,625,008 1,454,435 Inventories 865,251 757,457 Trade and other receivables 435,5
Slide 18: Balance sheet remains strong (Cont.)
Balance sheet remains strong (Cont.) As at As at 31 December 31 December 2010 2009 Audited R’000 Audited R’000 Total non-current liabilities 821,759 782,153 Loans and borrowings 312,786 363,626 Provision for closure and restoration costs 39,439 37,347 Deferred tax liability 469,534 381,180 Total cur
Slide 19: Strong cash position despite early debt repayment and maiden dividend payment
Strong cash position despite early debt repayment and maiden dividend payment 800 292 700 -22 -24 600 -103 463 500 R’millions 400 -167 321 300 -53 -51 -14 200 100 0 19
Slide 20: 24% EBITDA margin and return on capital over the last 5 years
24% EBITDA margin and return on capital over the last 5 years 100% EBITDA Margin * Return on Capital ** 81% 80% 60% 58% 40% 28% 24% 24% 19% 21% 22% 20% 17% 12% 0% -5% -12% -20% YTD 2006 YTD 2007 YTD 2008 YTD 2009 YTD 2010 Average * EBITDA/Revenue ** Profit (loss)after tax/(Share Capital and Share Pr
Slide 21: Projects
1. Highlights and safety 2. Market review 3. Financial review 4. Projects 5. Outlook 6. Appendix Lonmin UG2 Plant, North West Province, SA 21
Slide 22: Exciting pipeline of projects
Exciting pipeline of projects Expected Completion Description Date Waterval mine development 1 360 000 tonnes of ore per annum 2011 Lonmin UG2 Plant 2 1,5million tonnes per annum 2011 Project Tswelopele 600ktpa pelletising 3 and sintering plant 2013 Horizon mine development 4 480 000 tonnes of ore p
Slide 23: Continue to explore opportunities of Lion II to maximise shareholder value
Continue to explore opportunities of Lion II to maximise shareholder value • Lion ll – a 360 000 tonne per annum ferrochrome capacity smelter at a total capital cost of R4,9 bn • Smelter: R4,2bn • Mine: R700m • Commissioning is planned for H1 2013 • Merafe has a right to participate in 20.5% of Lion
Slide 24: Outlook
1. Highlights and safety 2. Market review 3. Financial review 4. Projects 5. Outlook 6. Appendix Peter Mokaba Stadium – Polokwane,SA 24
Slide 25: Stainless steel: melt production picks up in Q1 2011
Stainless steel Melt production picks up in Q1 2011 • Global stainless steel melt production is expected to increase by a healthy 8% y-o-y in 2011, mainly driven by strong end-user demand in China • China: 13% (11.4mt to 12.9mt) • ROW: 5,6% • Chinese distributors are buying again after the lunar hol
Slide 26: Ferrochrome outlook: robust demand and increasing prices
Ferrochrome outlook Robust demand and increasing prices • Majority of producers are at full capacity • Strong demand for ferrochrome globally • Increased sales volumes expected • Ferrochrome prices are forecast to increase in 2011 26
Slide 27: Key milestones achieved over the last decade
Key milestones achieved over the last decade 2001 Finance raised for Boshoek smelter Market Cap: R436m 2002 Commissioning of Boshoek smelter 2004 Entered into a JV with Xstrata to form the Xstrata-Merafe Chrome Venture 2005 Acquired an interest in Wonderkop smelter , related mines and 20.5% in Lion
Slide 28: Questions
ee MERAFE RESOURCES Questions 28
Slide 29: Appendix
1. Highlights and safety 2. Market review 3. Financial review 4. Recent developments 5. Outlook 6. Appendix Free State Stadium- Bloemfontein 29
Slide 30: Stainless steel product mix
Stainless steel product mix 80.0 70.0 300 Series 60.0 Share of Production, in % 50.0 40.0 30.0 400 Series 20.0 10.0 200 Series 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 30
Slide 31: Global end use of stainless steel
Global end use of stainless steel Share of Cumulated Output, in% 0 10 20 30 40 50 60 70 80 90 0 1 2000 - 2010, in % Non-allocated 2 Growth Rate 3 4 Average CAGR: 4.4% p.a. 5 6 7 Building & Metal Goods Engineering Transport Tubular Electro & Construction Products Electronic • Lifts, • Cutlery • Heat
Slide 32: Xstrata-Merafe Venture well placed to handle higher energy tariffs
Xstrata-Merafe Venture well Placed to Handle Higher Energy Tariffs Xstrata-Merafe Venture anticipated the changes in the South African electricity tariffs and invested in efficiencies: Lion Bokamoso Ferrochrome Specific Energy Consumption (MWh/T) 4.5 4.1 4.0 3.5 3.5 3.0 3.0 2.5 2.3 2.0 Conventional